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Doubling SaaS Revenue By Changing The Pricing Model

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Re: Doubling SaaS Revenue By Changing The Pricing Model

#31

Post by jbigelow76 »

glimcat wrote: post #26
dchuk wrote: post #18

Earlier quoted context omitted.

This is the exact path I'm taking with my company very soon (I refer to it as persona based pricing, not sure if that's the correct technical term or not). We've found that increased usage is not what differentiates our users (no one hits the imposed limits on their plans). So we're switching to plans that users should be able to read and immediately identify themselves with (Solo, Consultant, Agency) Would love to c…

I refer to it as persona - based pricing I hereby declare this to be the correct technical term for it. The guys in marketing may be calling it something else, but I don't think you'll find a more succinct description of the strategy.

    The guys in marketing may be calling it something else...
I have a suspicion the marketing guys might come up with that terminology as well (sorry I couldn't resist a little off topic inside baseball)

Re: Doubling SaaS Revenue By Changing The Pricing Model

#32

Post by tptacek »

casca wrote: post #28
patio11 wrote: post #17

Earlier quoted context omitted.

I haven't worked directly with any online backup software companies (and wouldn't give you their secrets if I had). In general, I'd try to align pricing with customer success, such that e.g. a big enterprise doing online backup of a mission critical application would end up paying a heck of a lot more per anything than a bride backing up her wedding photos. This would tend to suggest not pricing backups by weight at…

The reason that Colin can get away with the picodollar model is that the type of people who use tarsnap would get annoyed if they were charged for 1gb if they were using 100mb. _For those customers_, there is a clear correlation between the price being charged and the value provided.

You've disastrously misunderstood what Colin is doing.

Colin "gets away" with "picodollar pricing" because he is deliberately segmenting away most of his customer base. I am not entirely sure why he is doing that, but he has made a strategic decision in the short term to make less money in order to build his service up more slowly and, I presume, carefully. He exclusively wants the kind of customers who will not be annoyed with this annoying price model; in other words, the kind of customer that has time to reason through the idiosyncratic pricing scheme of a new backup service.

Unless slowing the growth of your own service is one of your goals, do not mistake what Colin is doing here with a pricing strategy that works in the general case.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#33

Post by true_religion »

> The minimum buy-in for the service is now $99 a month, which should scare away the idiots.

I'm scared, and as a potential customer I hate to be labeled an idiot.

I'm very happy with New Relics system even though they're priced higher than you per server, they at least offer a price PER server instead of tiers.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#34

Post by ricardobeat »

tnorthcutt wrote: post #8
cfn wrote: post #6

When I change pricing I always worry that current customers will be unhappy because they might have saved some money had they bought it later (I sell a desktop product). Is this a problem you have seen youself when you sold desktop software?

Why would you be lowering the price? Regardless, just refund the difference for anyone who asks.

This is the kind of behaviour we all deeply hate from TelCos, why would you do the same?

I'd say offer the new price to all and get happier clients. If you can't afford that then why are you lowering prices in the first place?

Re: Doubling SaaS Revenue By Changing The Pricing Model

#36

Post by Retric »

ricardobeat wrote: post #35

> The minimum buy-in for the service is now $99 a month, which should scare away the idiots And bootstrapped startups, etc. This isn't just a pricing change but a market repositioning?

99$ a month is reasonable for bootstrapped company's. It's not reasonable for most hobby's, but 50$/month or 100$ / month are both rather high for a hobby website so there is little real loss.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#37

Post by 147 »

patio11 wrote: post #2

Happy to answer questions to the extent that I can. Speaking of which: if it isn't transparently obvious by now, I really, really like getting feedback about how my advice worked out. If you ever implement a suggestion from me (particularly with an A/B test), please, drop me an email. Even if the result was "Well, that was sure an epic failure", because negative confirmation is useful, too. (If you want to share resu…

What about pricing a B2C SaaS? It seems to me that all of the advice I've found leans towards pricing B2C and charging a lot more money. Will applying the same techniques work for B2C where customers will be more stingy with their money?

Re: Doubling SaaS Revenue By Changing The Pricing Model

#38

Post by kkowalczyk »

ricardobeat wrote: post #34
tnorthcutt wrote: post #8

Earlier quoted context omitted.

Why would you be lowering the price? Regardless, just refund the difference for anyone who asks.

This is the kind of behaviour we all deeply hate from TelCos, why would you do the same? I'd say offer the new price to all and get happier clients. If you can't afford that then why are you lowering prices in the first place?

We hate TelCos who lower the prices and even apply them retro-actively? That's news to me.

But more to the point: the logistics of making refunds on purchases like software are complicated. Most payment processors don't even have the notion of partial refunds.

Making a full refund is costly to you (payment processor took their cut of the transaction; they aren't too eager to give it back to you so either they charge you (and now you have a loss) or they swallow the charge but will kick you out of the system if they have to do it too frequently).

There might be more bad will generated by contacting the customers and offering them refund because that makes them aware of some event that they might not like.

Most people don't monitor the price of software they bought over time so they are not aware of changes so they are not upset about changes. I've bought a bunch of software over time and I can't tell how much any of it cost - I just don't keep track.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#39

Post by ricardobeat »

Retric wrote: post #36
ricardobeat wrote: post #35

> The minimum buy-in for the service is now $99 a month, which should scare away the idiots And bootstrapped startups, etc. This isn't just a pricing change but a market repositioning?

99$ a month is reasonable for bootstrapped company's. It's not reasonable for most hobby's, but 50$/month or 100$ / month are both rather high for a hobby website so there is little real loss.

Yeah, in the US where that's 0.01% of a salary. Not so almost everywhere else in the world.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#40

Post by the_bear »

true_religion wrote: post #33

> The minimum buy-in for the service is now $99 a month, which should scare away the idiots. I'm scared, and as a potential customer I hate to be labeled an idiot. I'm very happy with New Relics system even though they're priced higher than you per server, they at least offer a price PER server instead of tiers.

Agreed. I don't doubt that being ruthless about A/B testing pricing increases revenue, but I'm not wild about the implied attitude that customers only exist so that we can extract as much money as possible from them. The user experience should definitely be a factor as well.

I don't think it's possible to support this claim with data, but I'm convinced that being ruthless and unfriendly with pricing can have a negative impact on the business in the long term. As a customer, I much prefer usage based pricing to arbitrary plans.

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